Best Savings Account Rates 2011

If you are looking for a better place to put your hard earned cash, you won’t be happy when you see the picture of current savings account interest rates. Since I started tracking savings account rates history in 2009, the general environment has deteriorated  a lot for savers seeking better return for their money as yields of savings accounts have come all the way from 4% APY to mostly around 1% right now. Believe it or not, 1.5% yield is very hard to find these days.

Since the Federal Reserve hasn’t done anything on its benchmark lending rate since 2008, you would expect commercial banks also keep their rates steady. That, however, isn’t the case. Somehow, I feel that it has become the game of racing to the bottom. Once a popular bank started to cut rate, many will soon follow suit, pushing  rates we customers get lower and lower. For a while in the second half of 2010, rates were mostly stable at major online banks, but a new round of cut seems to have started recently. In the past couple of weeks, I have seen banks such as Ally Bank, EverBank, Sallie Mae Bank and American Express Bank lower their rates, with EverBank cutting the most of its Yield Pledge Money Market Account, from 2.01% 3-month bonus rate to 1.51%.

On the other hand, some banks that once seemed to have fallen out of favor, like FNBO Direct and ING Direct, have shown great stability during the same period. FNBO Direct Online Savings Account, which has been at 1.10% APY for a long time, now actually beats Ally Bank, which was very generous for a while and one of the favorites.

Last year, I mentioned SmartyPig as an exception because, though not a traditional bank, it offered savers  a great rate that beat all the online banks I know. Not any more. After it was taken over by BBVA Compass last year, its rate has fallen sharply. Now at 1.35% APY, though still a little higher than what other banks offer, I don’t whether it is still able to attract new customers given those extra restrictions it has on how its customers use the service.

Anyway, here’s a short list of what you will get from some popular online banks. Nothing exciting, right?

• EverBank Yield Pledge Money Market Account: 1.51% 3-month bonus rate. The first year yield 1.13% for balance up to $50,000. $1,500 minimum deposit required to open an account, but $5,000 minimum balance is needed to avoid $8.95 monthly fee.
• Discover Bank Savings Account: 1.20% APY, $500 minimum deposit. No fee.
• American Express High-Yield Savings Account: 1.15% APY with no minimum. No fee.
• Zions Bank Internet Savings Account: 1.11% APY, $100 minimum deposit. Not fee.
• FNBO Direct Savings Account: 1.10% APY with no minimum. No fee.
• Sallie Mae High-Yield Savings Account: 1.10% APY with no minimum. No fee. Best savings account in 2010 by Kiplinger Personal Finance.
• Ally Bank Online Savings Account: 1.05% APY with no minimum. No fee.
• ING Direct Orange Savings Account: 1.00% APY with no minimum. No fee.
• HSBC Advance Savings Account: 0.90% APY with no minimum. No fee.

BTW, since all these banks are FDIC insured, you know your money is safe with them up to $250,000. If you want to have a better return, you may consider longer term saving vehicle, such as long term CDs. Or even try peer-to-peer lending, such as Lending Club, which has an average investor return of 9.6%. Though I have some defaults since becoming a lender, my return is much, much higher than what I get from banks. Of course, a higher return always come with a greater risk and there’s no exception in P2P lending. If you are interested in Lending Club, you can read more in my how to evaluate a Lending Club loan post.

Photo credit: tenaciousme